Judge Rules In Favor Of Puerto Rico Oversight Board's AuthorityA federal judge has ruled that Puerto Rico's government does not have final say on its finances. It belongs to a fiscal oversight board Congress appointed to get the island out of debt.

A federal judge has ruled that Puerto Rico's government does not have final say on its finances. It belongs to a fiscal oversight board Congress appointed to get the island out of debt.

RACHEL MARTIN, HOST:

A federal judge has ruled that Puerto Rico does not have the final say when it comes to its own fiscal policy. The final word belongs to a fiscal oversight board that Congress created two years ago. It's a ruling that will have far-reaching consequences for the island's financial future. To talk about that, let's bring in NPR's Adrian Florido from San Juan, Puerto Rico. Hey, Adrian.

ADRIAN FLORIDO, BYLINE: Hey, Rachel.

MARTIN: So this fiscal oversight board was created way before the hurricane when Puerto Rico, though, was still suffering from all kinds of financial problems, right?

FLORIDO: Yeah. I mean, remember it was a couple of years ago that Puerto Rico's government basically said that it would not be able to pay the more than $70 billion that it owes to bondholders. And so that led Congress to do two things. It passed a law allowing the island to effectively declare bankruptcy to restructure that debt. It also created this seven-member board with huge power to make decisions about the island's finances in order to get this debt under control and to turn the island's economy around. Listen to what the board's chairman, Jose Carrion, told me and our colleague Michel Martin back in June.

(SOUNDBITE OF ARCHIVED BROADCAST)

JOSE CARRION: The government's function, aside from taking care of, you know, the needy, is to create the economic conditions whereby private enterprise succeeds and employs folks, creates wealth. That's the nature of our system. Our Puerto Rico needs the structural reforms that will allow it to do so.

FLORIDO: So what the board sees one of its roles as being is forcing the Puerto Rican government to implement these sorts of reforms along with huge spending cuts. And this, as you can imagine, has been a big source of tension.

MARTIN: Right. So then their control was essentially called into question because the governor of Puerto Rico and the legislature in Puerto Rico sued the oversight board last month.

FLORIDO: Right. Well, the governor and the legislature don't believe that this federally appointed board should be able to force the local government to implement these austerity measures. They think they can recommend but not require the government to do so. And so one example in Puerto Rico - workers are entitled by law to a Christmas bonus. The board wants this bonus eliminated. And so in the budget that it drew up for Puerto Rico it did not include enough money for it, something the governor said it did not have the right to do. That's just one example. I mean, the fundamental question here - right? - is when it comes to fiscal policy, to fiscal reform, can this board do that? Who has the final say - the elected government of Puerto Rico or this board created by Congress? And yesterday, what this federal judge ruled is that it's this appointed board, that they have the power to overrule Puerto Rico's government when it comes to financial policy.

MARTIN: Wow. So I can't imagine the government in Puerto Rico, the governor there especially, is very happy about this then.

FLORIDO: No, he was not. He was overseas. But he issued a statement saying that it was proof that Puerto Rico, which is a U.S. territory, is in fact more like a U.S. colony. He called it an undignified relationship because, you know, Congress is basically dictating policy, he said, without the island's consent. On the other hand, the members of this oversight board, some of whom are from Puerto Rico, others are from the mainland U.S., they welcomed the ruling, and they said it was time for the governor to begin implementing these cuts and austerity reforms to get Puerto Rico back on the right track.

MARTIN: So what does it mean then? I mean, if you consider the fact that now the democratically elected government there, their power and control over Puerto Rico has been curtailed, what does that mean for regular folks?

FLORIDO: Well, that's absolutely right, what you just said. It also means that for regular folks they can expect, you know, more cuts to services, benefits, even pensions. Some of these cuts have already begun, like to public education, the health benefits. And we're talking about an island where through - where half of the population lives in poverty, and these cuts can be expected to slice pretty deep.

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